It has recently tied up with Punjab National Bank and will be using the huge network of 2000 branches of the bank all over the country for distribution and receipt of forms for investment in government securities.

PNB Gilts managing director Arun Kaul says that in the past high networth individuals have invested in government securities. "But now, for the first time in the country, an effort will be made to retail the scheme to large number of individuals across the country." "Besides the advantage of providing better returns than banks, government securities also offer safety," he said speaking to The Financial Express.

According to him not many are aware that cut off yields of government securities are much better than bank interest on fixed deposits. Average cut off yeild of a 14-day treasury bill increased to 8.23 per cent in 1999-2000.

Investment in gilts also provide the additional benefits of tax saving of up to Rs 3,000. Moreover, government securities are liquid instruments and carry no loss of interest as in the case of bank fixed deposits when maturity period is ended early by the depositor. Also transactions selling or buying can be instant and can be credited to the DP account of an investor and there is no tax deduction at source. Government market borrowings amounted to Rs 99,630 crore during the year 1999-2000 and is budgeted to be Rs 1,17,704 crore in 2001-2002. Mr Kaul feels that primary dealers have great potential to expand operations, but as far as the economy is concerned it is a `catch 22' situation.

Large borrowings means larger interest outgo leading to larger deficit financing. "If demand for funds from industry gathers pace, then government borrowings have the danger of changing the entire interest-rate and economic scenario," he noted.

Mr Kaul said major operators in government securities were banks, insurance companies, Mutual Funds and Provident Funds. But the company is trying to expand the market to other segments like corporates, cooperative societies, regional corporate banks and state level undertakings. PNB Gilts held a seminar in Chennai on Friday for state level undertakings like Tamil Nadu Urban Infrastructure Development Fund. TN Power Finance, TWAD, Metro Water.

New Tirupur Area Development Corporation Ltd and Municipal Administration to explain suitable investment strategies with a view to maximising returns on investments.

Topic handled included among others how to invest in government securities, impact of equity market, role of mutual funds and use of short-term surplus funds to get better returns. "The response from Chennai corporates and state level undertakings was very good," Mr Kaul said adding that the company was building awareness about government securities market among investing public.